Making School Finance Work in TX

"Robin Hood" and his Merry CEDs

Redistribution of Local Porperty Tax

1992; Implemented in form of the County Education District; made tax wealthy district unhappy; Many gave away funds; Received back less revenue from CED than they put in; Found Unconstitutional; Senate Bill 7 emerged: gave districts 5 options.

5 choices

#1: Consolidate a tax-wealthy district with a tax poor district. Benefits: reduce admin costs Negatives: not purely a financial issue; it is a local, political issue.

#2: 2 Districts remain separate but consolidate their tax bases for local taxation purposes. {Not been done in TX}

#3: Tax wealthy district could transfer property account or accounts to another district for taxation purposes consolidating their tax amounts through that said company. Example: Remington Not clear on how long that lasts...does it have to be redone yearly? Hard to plan, etc.

{Corpus Christi only school to do this}

#4: Called Option #3- Calculate how much must be given away and send the money back to TEA for redistribution. Must be sent to TEA by Feb. 15. Most schools receive bulk of their tax revenue by January 31.

#5: Called Option #4- Same as "Option #3", but depends on the time the agreement is made to send it back. If money is sent back prior to Sept. 1 5% of the gross cost or $100 for every weighted student in the tax-wealthy district retains in weighted average daily attendance (WADA) versus 4% and $80 per student in "Option 3".

How does this work for poor districts?

They need to find a wealthy district whose cost per WADA is greater than the funding they get from the state.

Remember that students don't always count in one funding formula so enrollment can often look bigger than it really is.

It appears to be about swapping kids: Example poor district WADA is 6871 and they get $3551 per WADA. They do "Option 4" with a richer district. The richer district has a WADA of $4575. Subtract those two and you get $1024. Now multiply that by the WADA and you get $7,035,904 because of that deal. Often tax rich schools will not send money until February, and will do so at $1 a month until August and then they square up with their poorer school counterpart.

How does this work for rich districts?

Create a contract

Has forced larger districts to raise tax rates

Can spread payments over 6-7 months and not always equal installments.

Current wealth cap on a student is $305,000 in WADA {VERY IMPORTANT}--but has not kept up with rate of salary adjustments and general inflation

Many rich districts are struggling like poor districts

The Good and the Bad for TX Schools

Good: Redistributed tax revenues helping poor districts

tax wealthy districts increased tax rates and tighten belts

Brought schools closer to the $1.50 M&O cap.

Brought schools together

Still need to increase funding.

Bad: Money is spread too late in the year to help

In areas of low tax prosperity, money is sent through Tier I to help, where as in richer districts, funding is generated through Tier II

Poorer districts get more money from state funding b/c they don't have the tax base unlike more affluent areas, which receive no Tier I funding.

$305,000 isn't enough for TX schools to keep up.